+1.56(+4.17%)

-38.80(-2.25%)

-0.49(-2.72%)

-0.0050(-0.44%)

Influencers Transcript: Charlie Munger, May 9, 2019

ANDY SERWER: A business empire needs decisive leadership, but also a steady hand. For over 40 years, Charlie Munger has been the latter for Berkshire Hathaway. As Berkshire's Vice Chairman, the 95-year-old Munger is Warren Buffett's right-hand man. He's also an investing legend in his own right. Munger ran a firm in the 1960s and '70s that scored returns of over 24% per year. He's here to talk about how to make investment decisions and life choices that help secure prosperity and longevity.

ANDY SERWER: So you just had the annual meeting. And I have to ask you what your favorite moments of that were.

CHARLIE MUNGER: What I like is that both the shareholders and employees of Berkshire are so extremely enthusiastic. And it's not just that they made a lot of money and have nice careers. They think they're on the right side.

ANDY SERWER: And, you know, they come there to hear you guys talk all day. And--

CHARLIE MUNGER: Yeah, it's like a cult.

ANDY SERWER: It's like a cult?

CHARLIE MUNGER: Yeah.

ANDY SERWER: In a good way, though?

CHARLIE MUNGER: Yeah, a good cult. Yeah, it's a good cult.

ANDY SERWER: OK. I mean, and the stuff that they hear-- some of it's new, some of it's old, and a lot of it is common sense. And you were talking a lot about--

CHARLIE MUNGER: All of it is common sense.

ANDY SERWER: Right.

CHARLIE MUNGER: But of course, when people use the word "common sense," what they mean is uncommon sense. Because the standard human condition is ignorance and stupidity. And when they say, old Joe has common sense, what they mean is he has uncommon sense.

ANDY SERWER: I guess it's a bit of a misnomer then.

CHARLIE MUNGER: It really is.

ANDY SERWER: So, yeah, why is it that people can't think clearly about investing or decisions in their lives?

CHARLIE MUNGER: Well, they don't think very well about sex or gambling either. You know, I think the standard human condition has a lot of miscognition.

ANDY SERWER: And there are ways to make hay of that or--

CHARLIE MUNGER: Yes. You take advantage of other people. You can improve your own life by eliminating your miscognitions.

ANDY SERWER: Let me shift gears a little bit, Charlie, and ask you about the US economy. And what is your take on where things are right now?

CHARLIE MUNGER: Well, obviously, they're booming. But, you know, the economy sometimes booms, and sometimes it doesn't. And you have to live your life through both episodes. And our idea is we just keep swimming. And sometimes the tide is with us, and sometimes against. But we keep swimming either way.

ANDY SERWER: Are you surprised by how long this expansion has lasted?

CHARLIE MUNGER: Of course, it's lasted a long time. But what was really remarkable is that we never printed money so much and spent it so fast and bought back so much debt, public and private. So this is total terra incognita in economics. And nobody knew for sure how it was going to work.

ANDY SERWER: So was it risky then?

CHARLIE MUNGER: Of course it was risky. But it worked. And I don't think they had much else that it would work. They weren't set up to do stimulus-- too much controversy. Democratic inertia is very thin. So they had to do something. And all they had left was just to print money and start buying things. And that's what they did. And it turned out to be a very wise response. And what's even more remarkable is that both Congress and the presidency and both parties made the same decision. They all cooperated. It was the last time.

ANDY SERWER: But where's that going to leave us ultimately?

CHARLIE MUNGER: Well, it left us licking the Great Recession. So maybe we ought to try cooperation again since that worked so well once.

ANDY SERWER: How much is President Trump responsible for this current economic situation?

CHARLIE MUNGER: Well, I think he deserves some credit, but a lot of it just happened.

ANDY SERWER: Economic cycle?

CHARLIE MUNGER: Yeah. And the decisions of his predecessors.

ANDY SERWER: What do you think about the president's campaign to lobby the Fed to lower rates or keep rates low?

CHARLIE MUNGER: Well, I think presidents have always done this. If you're a politician in a democracy, of course you want people to earn money and spend it. And of course, that's not a good idea. The best example probably in the whole world is Singapore, which has zero debt and never prints money and spends it. And it's one of the most successful places on earth. I wish we were like that, but there's only one Singapore.

ANDY SERWER: Well, some people now say that federal debt is not a problem at all.

CHARLIE MUNGER: Well, if you believe that, you believe in the tooth fairy. Because then we don't have to have any more taxes ever. We'll just print money and live happily ever after. It obviously won't work. There comes a point when printing money is counterproductive.

ANDY SERWER: Are we at that point? Are you concerned?

CHARLIE MUNGER: No, I don't think we are at that point. But nobody knew where the point was going to come. And we don't know now. None of these people who are so pompously sure of things, because we all want reassurances, so they provide it. But nobody really knows how much of this is too much.

ANDY SERWER: And do you have any thoughts on Jay Powell and the job that he's done?

CHARLIE MUNGER: Well, I think a lot of him. I think he's as good a choice as we could have made.

ANDY SERWER: One consequence of this expansion-- or actually, it precedes that. It's just something that's occurred in our economy over the past 50 years really-- has been wealth and income inequality.

CHARLIE MUNGER: Yeah.

ANDY SERWER: One, do you see it as a problem? Two, if so, how do we address it?

CHARLIE MUNGER: Well, it's a problem if enough politicians are screaming about it. That makes it a problem. If it weren't for that, this one will go away by itself. It happened by accident. We were in desperate trouble. We were on the eve of a great recession that could have been a great depression and then followed by the rise of people like Adolf Hitler and so on and so on.

So we faced a real catastrophe. The only weapon they had with this huge-- was to print money and spend it. And they did it. Of, course, and they drove interest rates down to zero, or real interest rates. Well, of course, that lifted asset values for the people who were already rich. Nobody was trying to make the rich richer. It just was an accidental byproduct of a correct governmental decision made on a bipartisan basis. And since it was a weird byproduct that occurred in a weird time, it will go away by itself in due course.

ANDY SERWER: It will go away by itself?

CHARLIE MUNGER: Sure.

ANDY SERWER: So there's no reason for--

CHARLIE MUNGER: The people who are screaming about it are idiots. It's going to go away by itself. And that's not to say that we can't raise the minimum wage a little or enlarge the social safety net a little. We should be doing that as we prosper. Both parties agree on that.

ANDY SERWER: What do you think about the proposals put forth by Alexandria Ocasio-Cortez and Elizabeth Warren that would greatly address this problem?

CHARLIE MUNGER: Well, I don't consider those two necessarily the best prescribers in the world. They're kind of likeable. I particularly kind of like Elizabeth Warren. She's got a manner that appeals to me.

ANDY SERWER: I want to ask you just a few more questions about politics, and we can talk about the markets and Berkshire a little bit more. What about the situation that we find ourselves in with the Mueller Report and the way Congress and Democrats are fixating on that and the president's on the defensive? What is your thoughts thinking on that?

CHARLIE MUNGER: I tend to avoid the whole subject, just as I ignore-- tide with me, tide against, and just keep swimming. But both parties are so partisan now that they're blinded by their anger. And I don't want to be blinded by my anger, so I control it. And I would recommend it to both parties. I think they should all cool it.

ANDY SERWER: Why are we so divided up, Charlie, right now in this country?

CHARLIE MUNGER: Well, anger, when you pound on one another, feeds on itself. That's one of the great difficulties with it. It's irrational and it feeds on itself. So I liked the world when it was Dwight Eisenhower against Adlai Stevenson, and more similarly, and Ronald Reagan and Tip O'Neill got along. And a lot of it was done. My war was a bipartisan war. And in the aftermath, foreign policy in the United States was a bipartisan policy. I liked that world better. I hate this extreme hatred on both sides.

ANDY SERWER: Will we ever get back to those days or get to new days where we don't have the hatred?

CHARLIE MUNGER: Probably. You live long enough, a lot of good things happen and a lot of bad things happen.

ANDY SERWER: Fair enough. It's my understanding, Charlie, that you were instrumental in helping Warren get away from focusing on the "cigar butt" form of investing and looked more towards companies that-- I guess you could call them branded companies.

CHARLIE MUNGER: Better businesses.

ANDY SERWER: Better businesses, right?

CHARLIE MUNGER: Yes.

ANDY SERWER: How did you help him make that decision?

CHARLIE MUNGER: Well, it was probably obvious. And he'd made so much money in the other technique that it was hard for him to leave something that worked so well. But it was not going to scale. So when he started looking for investment values in great businesses that were temporarily under pressure, it changed everything for the better. Now we can scale up to the big time.

ANDY SERWER: Are Apple and Amazon technology companies or are they brand companies?

CHARLIE MUNGER: Both.

ANDY SERWER: Someone told me they asked Warren if he could buy one brand-- this was about 4 years ago-- what that company, what that brand would be. And he said Gillette, which makes sense. What would that company be today?

CHARLIE MUNGER: Coca-Cola.

ANDY SERWER: Still?

CHARLIE MUNGER: If you take the amount of Coca-Cola drunk in the world and the main flavor, it's one hell of a brand. Now, it's such a different product from this stuff on the internet. I don't have the same-- my judgment would not be as good on the internet as it is on Coca-Cola.

ANDY SERWER: I want to get back to Apple. Tim Cook was at the meeting yesterday.

CHARLIE MUNGER: He was, indeed.

ANDY SERWER: Did you get a chance to speak with him?

CHARLIE MUNGER: I did.

ANDY SERWER: Can you tell us what you guys talked about?

CHARLIE MUNGER: Nothing. We exchanged pleasantries, but he's a wonderful guy. And of course, it's a huge record that he's building.

ANDY SERWER: Let me ask you a little bit about Kraft Heinz and that situation. During the meeting yesterday, we found out that the chief marketing officer was leaving the company. Did you know that? And what does that mean for the company?

CHARLIE MUNGER: I knew nothing about it in advance. What happened there was very easy. The truth of the matter is that Heinz ketchup was a stronger brand than Kraft cheese. And they paid more for it. So one acquisition worked brilliantly, and the other worked poorly. Well, welcome to adult life. It happens to everybody.

ANDY SERWER: You mentioned that you think that Tim Sloan could still be or should still be the CEO of Wells Fargo.

CHARLIE MUNGER: Yeah, if I were running the world, Tim Sloan would still be the CEO of Wells Fargo.

ANDY SERWER: Well, why did he leave then?

CHARLIE MUNGER: Well, he made this decision. But he was being pushed hard. He did it for the benefit of the company. There was just so much of this partisan hatred that was washing off against Wells Fargo. It's understandable. He was there for a long time. The company had defrauded its own customers. Nobody was seemingly being punished for it in some people's minds.

Listen, two CEOs left under pressure. I regard that as a lot of punishment. So I don't think these people were failing with their anger. They removed two CEOs, and so-- but now they went out, and they-- like, Tim Sloan was not responsible for the crazy incentive system that created the trouble. So they threw him out the way you'd take out the charwoman on your way to a gambling establishment.

ANDY SERWER: Getting back to Coca-Cola, you mentioned that it would be a bad idea if it got into cannabis. I mean, why not? Doesn't it make sense?

CHARLIE MUNGER: Because it's such a wholesome brand and associated with happiness. Why do we want to associate it with a recreational drug?

ANDY SERWER: Well, they have to grow.

CHARLIE MUNGER: No, I think it would be a terr-- I think that would be a terrible idea.

ANDY SERWER: What about Boeing and the 737 MAX? I mean, they're going to fix that. Would you go on the plane?

CHARLIE MUNGER: Of course they're going to fix it.

ANDY SERWER: Would you go on the plane after they said it was fixed?

CHARLIE MUNGER: Yes, of course. And they will fix it well. But I don't think it was really all that excusable. They made the mistake.

ANDY SERWER: I want to ask you, Charlie, a little bit about--

CHARLIE MUNGER: That was a serious mistake.

ANDY SERWER: Yeah. So then they're still working on it?

CHARLIE MUNGER: Yeah, they'll fix it. Boeing probably has the best safety record in the world if you take 60 years. And this was a very unusual lapse. There may not be another one for 60 years.

ANDY SERWER: Is that lapse symptomatic, though, or indicative of us developing software that's too powerful and we don't understand the consequences of it?

CHARLIE MUNGER: No, I don't think the problem was that. I think it was just an absolute lapse of being a big bureaucracy.

ANDY SERWER: You also mentioned at the meeting yesterday doing billion-dollar deals overnight with very short contracts.

CHARLIE MUNGER: Yeah, we've always done that.

ANDY SERWER: Has that ever blown up on you?

CHARLIE MUNGER: I can't think of a single example in my whole life where keeping it simple has worked against us. We made mistakes, but they weren't because we kept it simple.

ANDY SERWER: And that's simple.

CHARLIE MUNGER: I would say that the chief advantage that Berkshire's had in accumulating a good record is that we have avoided the pompous bureaucratic systems. We've tried to give power to very talented people and let them make very quick decisions.

ANDY SERWER: I want to ask you about something that's talked about all the time with you guys, which is succession. And again, you talk about that all the time. And there's been countless barrels of ink spilled. But if you're getting older, how do you make the decision to step back if you may not have the mental acuity to make that decision?

CHARLIE MUNGER: Well, I think you'll be surprised at how well both Warren and I are capable of stepping back when we feel that our powers are too far deteriorated.

ANDY SERWER: Have you talked about that?

CHARLIE MUNGER: Sure. And Warren has told people to speak up when the time comes. If we've been rational all this way, do you think we're not going to try and be rational right to the bitter end?

ANDY SERWER: Is the process-- I mean, we're sort of in the middle of the process. You've been giving more and more control or authority to Ajit and Greg and Todd and Ted. So it's sort of a continuum of processes like that?

CHARLIE MUNGER: Of course. And by the way, it's working fine. It's amazing how good this next generation is and they're steeped in our non-bureaucratic ways. There's these big bureaucracies. They think the work is done if you get out it of your inbox and into somebody else's inbox. That is not getting it done. Getting it done is when it's done, not when it's in somebody else's inbox. And if everybody's in a big committee meeting all the time, you're worn out at the end of the day and you haven't done anything.

ANDY SERWER: Are Ted and Todd making all the stock choices at this point?

CHARLIE MUNGER: No, of course not. Warren steps in and does big things.

ANDY SERWER: Where do you think, Charlie, the biggest opportunities are globally right now?

CHARLIE MUNGER: Well, I don't think we have a master plan of knowing where the opportunities are. We're trying to find intelligent things to do with a torrent of surplus cash. And we've always had a torrent of surplus cash. And we're always looking for intelligent things to do with it. And if we find things that are intelligent to do, we do it. And if we don't find anything, we'll let the cash build up. What the hell's wrong with that?

ANDY SERWER: Not much.

CHARLIE MUNGER: Yeah, not much is right.

ANDY SERWER: So I know that you guys have talked about England, or it seems that you have, because Warren talked about doing this article in the "FT" is basically a way of signaling potential interests, given that Brexit may create some opportunities. Is that the case?

CHARLIE MUNGER: What the hell do I know about Brexit? I don't even know how I'd vote on it if I were in England. (CHUCKLING) Yeah, I just don't-- I don't know much about it. But we'll react to opportunities wherever they are. And we regard the vicissitudes of politics as-- it's just what they are, vicissitudes.

ANDY SERWER: But isn't it a little bit more than a vicissitude to drop out of the European Union. I mean, is the European--

CHARLIE MUNGER: Now. I'm not suggesting it isn't a good deal. But this country was enormously helped when we put all the colonies together. If we had the internal tariffs against each little colony, United States would not be as big as it is. So it's understandable why Europe wanted to get together. And in addition, the advantages they got from the free trade, they'd had a long history of having wars. And we all are in sort of one big place trading with one another, it'll be safer. Those were very good ideas. I'm not quarreling with the basic ideas.

On the other hand, if you have unlimited immigration from one country to another, that causes lots of strains. Look at Germany. Merkel brought in more immigration than her people she wanted. She was leading a parade and she looked back and nobody was following. So these very few people want unlimited immigration of a different culture.

ANDY SERWER: Doesn't it--

CHARLIE MUNGER: We've made it work in America, but we had a vacant continent to work on. It was easy. Vacant and rich-- oil, minerals, wonderful soil.

ANDY SERWER: Should we still be letting immigrants into this country?

CHARLIE MUNGER: I think we should have way more control over our borders than we do.

ANDY SERWER: Isn't that different from--

CHARLIE MUNGER: Donald Trump is right on that. And I think the Democrats are committing suicide by being so-- they hate him so much that they're against him even when he's right.

ANDY SERWER: It seems like the borders is conflated with immigration policy sometimes. Is that right? I mean, in other words--

CHARLIE MUNGER: Well, of course they are.

ANDY SERWER: Yeah.

CHARLIE MUNGER: But I think we ought to have some control over immigration, some effective control. I think the bulk of the people want to be very nice to the people who are already here, including all the people from Latin America. But they want more control over the inflows.

ANDY SERWER: Are you concerned about this rise of somewhat nationalistic leadership around the world, like in Turkey, in Brazil, in China, and the United States arguably?

CHARLIE MUNGER: Well, take Brazil. Who in the hell would like Brazil? It's a great climate and a great country, but they're screwing it up fairly well.

ANDY SERWER: You mean the new leader, or just what's happened previously.

CHARLIE MUNGER: What's happened generally.

ANDY SERWER: Yeah. OK. So does that require a strong man to take over though?

CHARLIE MUNGER: Well, I don't think I've got deep knowledge on exactly what works well in the internal politics of every other country. Who would have guessed that the Chinese communists would improve their big country as much as they have in the last 30 years?

ANDY SERWER: That surprise you?

CHARLIE MUNGER: Well, they didn't the first 20 years. They had the Cultural Revolution. It was crazy. And now they have one of the greatest success records in the history of mankind. I don't know about you, but I did not predict it.

ANDY SERWER: I didn't. So what is the secret to China's success then?

CHARLIE MUNGER: They copied Singapore.

ANDY SERWER: Which is--

CHARLIE MUNGER: Remember? The Communist leader said I don't care if the cat is black or white. I care whether it catches mice. And they copied a very wonderful, famous Chinese man in Singapore. And lo and behold, they found the right-- they found the right Chinese leadership outside of China, which amuses me. Now, he was Chinese.

But look at the way it worked. In the whole history of the world, no nation that big has ever advanced that fast. And they did it by having a bunch of poor people save half their income. They did not use the wealth of the rich world to get ahead. They used the savings of poor people. I am a huge admirer of what the Chinese have accomplished. And I give-- if you ask me who is the one man who did the most for China, it was Lee Kuan Yew of Singapore. They copied him.

ANDY SERWER: Are you still sanguine about the future for China right now? There's a lot of concerns about slowing growth and leverage in the system.

CHARLIE MUNGER: I'm quite optimistic. They've been succeeding for a long time. Sure, they have ups and downs, and they make mistakes as well as good decisions. But if the average amount the Chinese are getting ahead, they're not moving backward.

ANDY SERWER: What do you think the economic relationship between China and the United States looks like, say, two years from now?

CHARLIE MUNGER: Well, if both sides have any sense, they will be better and better friends and adjust all differences. It is stark raving madness on either side not to make a friend of the other really powerful nation on Earth.

ANDY SERWER: I want to ask you a little bit about some Silicon Valley stuff. I mean, you said yesterday you were ashamed of missing on Google.

CHARLIE MUNGER: Yeah, I am. We could see, if we had looked carefully at our own companies, that their advertising was working way better than other advertising. Just we weren't paying enough attention.

ANDY SERWER: So was it too late?

CHARLIE MUNGER: I don't know. I don't know everything, you know?

ANDY SERWER: Well, we'll leave that aside. But, you know, you look at these tech investments, so they're Apple, now Amazon. Did you know about the Amazon purchase? Were you involved in that decision?

CHARLIE MUNGER: No, of course not. I have never owned a share of Amazon. I am a huge admirer of Bezos. I think he's been sort of like Lee Kuan Yew. He's a leader that's all by himself. He's been just a perfectly amazing human leader. But it's always been too complicated and uncertain for my particular temperament.

ANDY SERWER: It's interesting because--

CHARLIE MUNGER: And I find other things to do that'll work fine.

ANDY SERWER: Someone was telling me the other day that they thought that you could actually sort of think of Apple and Amazon not as technology companies so much, but as big-branded growth businesses, which would be something that would be appealing to you.

CHARLIE MUNGER: Oh, I think they're both brands and technologies. And it's hard to separate the effect of one from the other.

ANDY SERWER: OK. And as far as what's going on in Silicon Valley right now with IPOs, unicorns going public and not having any profitability or any prospect of profitability in the near term, what do you think of that situation?

CHARLIE MUNGER: Well, there are a whole lot of things I don't think about. And one of them is companies that are losing $2 or $3 billion a year and going public. It's not my scene.

ANDY SERWER: Have you looked-- so, you're not interested in Uber or companies like that necessarily?

CHARLIE MUNGER: Well, I have to be interested when they're that important and sweep the world and change practice. But I don't have to invest in everything I'm interested in. I'm looking for things where I think I can predict what's going to happen with a high degree of accuracy. And I have no feeling that I have the ability to do that with Uber.

ANDY SERWER: Right. I want to ask you about architecture, which is something you've been interested in for a while. How did you get interested in that, and what is your current situation there?

CHARLIE MUNGER: Well, I had an uncle who was an architect. And it's-- I've always thought it was the queen of the arts. I think architecture does more good than painting or sculpture. So I think architecture is hugely important, very interesting, and does such an enormous good when it's done right. So I'm a big admirer of the potentiality of the profession. But I think that-- I think a lot of people go into architecture because they're sort of frustrated sculptors. And they don't think with enough common sense or uncommon sense about what the hell they're doing.

ANDY SERWER: What are some projects that you've been involved with them?

CHARLIE MUNGER: Oh, I've built houses. I've built office buildings. I've built apartments, houses. I've helped charities and educational institutions build things. I build science centers. I do a lot of it. I like it.

ANDY SERWER: Is this a creative outlet for you?

CHARLIE MUNGER: Yes, absolutely.

ANDY SERWER: Do you have some projects that you're working on right now?

CHARLIE MUNGER: Of course.

ANDY SERWER: Some architecture projects? What are they about?

CHARLIE MUNGER: Well, I'm working on a project at UCSB, University of California at Santa Barbara. And it's basically housing, but of several kinds.

ANDY SERWER: I want to shift gears and ask you a little bit about repurchasing shares. You said in the shareholder meeting, "I predict we'll get a little more liberal in repurchasing shares." How much more aggressive will you get? And do you think that's going to be a problem potentially with the Democrats?

CHARLIE MUNGER: Well, a politician that's in the business of howling about something, trying to create a sense of outrage-- they're always complaining about something. And it is true that a lot of people-- it got so popular to purchase shares that some people repurchased them even when they were too high priced. We will never do that. We're only going to buy them back if they're too cheap.

But of course that ought to be done. If you had a partnership with three of your crippled relatives and one of them needed some money, wouldn't you buy out the crippled relative with the company's money? It's just simple morality. But I do think it's being overdone by some people. And it undoubtedly is being done to prop up values, which I regard as an improper use of the share repurchasing technique.

ANDY SERWER: Should there be laws about that?

CHARLIE MUNGER: No. There are laws, and-- but we shouldn't be telling people what the right price is.

ANDY SERWER: Right. So I want to ask you a little bit about the social safety net we were talking about and Medicare. And do you support Medicare for all? Would that be something you'd be interested in?

CHARLIE MUNGER: Well, I'm one of the few Republicans you'll ever talk to that thinks we should have a single-payer system, but not one of the type that we're going to get. If you look at the single-payer system of Singapore, it costs 20% of what ours cost. And that's an advanced, civilized, high-income nation. And of course, the people are a lot healthier.

Well, of course I'd rather spend 80% less and have the people healthier. And of course I'd like to have American manufacturers not have this terrible burden of unnecessary health costs that affects their competitiveness in the world. So we have an insane medical system that grew like topsy by accident with the help of a lot of dumb governmental intervention. Not all of it was dumb, but some of it was. And this system is ridiculous.

If a young family has to pay $5,000 deductible to have a baby, they don't really have medical insurance. It isn't just the Medicare that's wrong. The whole damn system is going wrong. And the amount of unnecessary tests and unnecessary prolongation of inevitable death that's going on is a national disgrace. Of course I don't like it.

ANDY SERWER: Have you ever thought about moving to Singapore, Charlie?

CHARLIE MUNGER: Well, no, but I'd like to move some of Singapore's results into the United States. They have practically no deaths from opioids. They have a low crime rate. They have no debt of the whole country. No, no. They're doing a lot right. I wish to hell our politicians in both parties would spend a lot more time studying Singapore.

ANDY SERWER: But some people say-- many people say it's an authoritarian government. There's a lack of freedom there.

CHARLIE MUNGER: It's a democracy. It just does such a good job that the people keep reelecting it. I like that result. What the hell's wrong with that?

ANDY SERWER: I was with some people just a few minutes ago, actually. And they were kind of recounting some of your zingers. Do you spend time before the meeting, say, oh, I've got, like, these six zingers I'm going to get out during the annual meeting?

CHARLIE MUNGER: Never.

[AUDIO PLAYBACK]

- Think of all of the people you know that have tried to take one extra step that have fallen over a cliff. Well, on that happy note, we will conclude the meeting.

[LAUGHTER]

[END PLAYBACK]

ANDY SERWER: Those just come to you?

CHARLIE MUNGER: Yes. I think the meetings work better if they're spontaneous. If we were scripting things, I don't think people would like it.

ANDY SERWER: So you and Warren don't say anything at all before you sit down?

CHARLIE MUNGER: Zero.

ANDY SERWER: You have no idea what's going to happen.

CHARLIE MUNGER: That is correct.

ANDY SERWER: That's fantastic. So I want to ask you just a question or two about growing up. And you were at the University of Michigan. And you dropped out and joined the army, right?

CHARLIE MUNGER: I certainly did. And we all did in those days.

ANDY SERWER: Yeah, so how did that-- did the army influence you?

CHARLIE MUNGER: Well, everything influences you in your past life. Yes, of course that influenced me. I never wanted to be in a big bureaucracy. I was well toward the bottom. I finally got to be a Second Lieutenant in the Army. I was way down in the ranks. And nobody gave a damn what I thought about any subject. It just gave me a little job to do and I was supposed to do it. And of course, I didn't like that as well as having a freer rein to control my own destiny, and so on. So I am much better adapted to being a capitalist operator than I am to being a cog in a bureaucracy.

ANDY SERWER: Did you ever get in trouble in the army?

CHARLIE MUNGER: Of course.

ANDY SERWER: Tell us about that.

CHARLIE MUNGER: Well, my senior officers could tell I thought they were wrong. And I tried to hide it. And they could still tell. [CHUCKLES] And so, of course it-- I never got in any serious trouble, but they-- who in the hell likes a junior officer? You look over there and he's plainly indicating that he thinks you're an idiot?

ANDY SERWER: So that didn't work out too well.

CHARLIE MUNGER: Well, it worked out all right. I did my work well enough so they didn't bother me. But it was not a milieu where I was going to succeed.

ANDY SERWER: Right. So how did you figure out-- a lot of people look at your life and, you know, would want to emulate what you've done. Is that something that people can do? Look at someone like yourself and see your path? I mean, you were in real estate law, then investing. What do you even consider yourself? A businessman? How would you describe what you do?

CHARLIE MUNGER: Well, I don't consider myself a-- I think my way of thinking will work for anybody. I'm trying to be very rational and disciplined. So I think that much. But to flit around various careers and going into the other fellow's professional territory and trying to outdo him, and do all kinds of things like that, I think will not work for most people.

And so I always tell-- I'm always being visited by young men who say, I'm practicing law and I don't like it. I'd rather be a billionaire. How can I do it? And I tell him, well, I'll tell you a story. A young man goes to see Mozart. And he says, Mozart, and I want to start composing symphonies. And Mozart said, how old are you? And the guy says, 22. And he says you're too young to do symphonies. And the guy says, yes, but you were 10 years old when you were composing symphonies. And Mozart says, yes, but I wasn't running around asking other people how to do it.

ANDY SERWER: Right.

CHARLIE MUNGER: So I think this flitting around business is something not everybody should try.

ANDY SERWER: Yeah, I think the same--

CHARLIE MUNGER: I think if I tried it again, it might not work as well.

ANDY SERWER: You said just figure out how to--

CHARLIE MUNGER: I may have been quite lucky.

ANDY SERWER: --do something and do it. Why were-- you were lucky?

CHARLIE MUNGER: Yeah. Yeah, I think I had some luck, yes.

ANDY SERWER: Well, but I think there's more to it than that. I mean, where were you lucky?

CHARLIE MUNGER: Yeah, it's a combination of luck and skill. That's what all good records are.

ANDY SERWER: Right. So let me just ask you a few more questions then. Do you-- you eat all that peanut brittle up there, right?

CHARLIE MUNGER: Yeah.

ANDY SERWER: Is that your one peanut brittle day, or do you eat peanut brittle--

CHARLIE MUNGER: Yeah, it is.

ANDY SERWER: Really?

CHARLIE MUNGER: Yeah, it is.

ANDY SERWER: So the other 364 days, you don't eat much of it.

CHARLIE MUNGER: They put it there, right? Warren is so business-like. He likes promoting peanut brittle at the annual meeting.

ANDY SERWER: Well, don't the other Berkshire brands get jealous and say, why don't you put a railroad train up there, or something like that?

CHARLIE MUNGER: We've got a whole exhibit hall full of other brands promoting one another at the Berkshire meeting. You cannot claim that we're under-promoting.

ANDY SERWER: I would never claim that. But, you know, the Coke people and the See's people get special placement up there.

CHARLIE MUNGER: Yes, they do. But those are two where-- See's was our first great brand. And Coke is one of the great-- well, it's a great soft drink brand of the world. So they're entitled to have a special place.

ANDY SERWER: Do other companies asked to get put up there though?

CHARLIE MUNGER: Well, they all push themselves forward as much as we'll let them.

ANDY SERWER: Is that a yes?

CHARLIE MUNGER: Yes. Of course they want to be pushed up.

ANDY SERWER: And finally, Charlie, I want to ask you a little bit about philanthropy. And, you know, it seems like Warren has been sort of a little bit more upfront about that with Bill Gates and the Giving Pledge. And I know you're philanthropic as well. What is your thinking on that? How upfront--

CHARLIE MUNGER: Well, I wouldn't sign the Giving Pledge because I have already transferred so much to my children that I've already violated it. So I think I'm asking-- I'm seeking false credit if I join them and say I'm a big philanthropist that's going to give more than half of my wealth to charity. I've already given more than half of it to my children. So I can't join them. It's like coming back from the dead. I can't do it.

ANDY SERWER: But doesn't that make Warren mad? I mean, come on, Charlie--

CHARLIE MUNGER: No, he's not mad. When is Warren mad about somebody else's-- Warren thinks that each Berkshire Hathaway is entitled to do with his own money what he damn pleases.

ANDY SERWER: So let me just follow up on that-- what you did then. What was your thinking in terms of giving away money like that though?

CHARLIE MUNGER: Well, it's simple. I had a wonderful wife. Most wives worry that the husband, if he survives, will get involved with some nurse or something in his dotage and that the money will go away from the children. And I knew that my dead wife would have preferred to have the money go the children. So I arranged that she got her wish.

ANDY SERWER: Right. So any thoughts on how the meeting is going to be different next year? I mean, when do you start talking about that? Or do you even talk about the annual meeting?

CHARLIE MUNGER: We never talk about it. We just do what works as long as it works. And when it stops working or indicates it's going to stop working, we'll stop.

ANDY SERWER: Did Apple say they wanted to have some exhibit in the convention center this year?

CHARLIE MUNGER: I had no discussion with them. I don't have any idea what they're doing.

ANDY SERWER: And do you see a time when Ajit and Greg and Ted and Todd will come up there with you at some point?

CHARLIE MUNGER: I don't know how it will morph. I don't think that what worked in one area has to be duplicated in another. I don't think what we're doing would work for many people. I think it was an historical accident. We didn't do it on purpose. We just sort of drifted into it.

When it worked, we fanned the flames. But we didn't create it with any forethought. And I think some later generation will have some different system. I think there's more wise-assery in our meeting than would be appropriate forever. Now I'm the principal wise ass.